Why going green is the best bet for SMEs

Climate change mitigation measures can be adopted by any organisation despite their size. [iStockphoto]

Companies across the world are tripping to use the phrase, perhaps to cash in on the billions of dollars that are being thrown at cleaning up the world, using it as a marketing gimmick and appear sensitive to the environment or genuinely hoping to move away from the fossil fuels that are harmful to both human health and environment.

The question is, is it something that local firms should consider?

Is it a move that small and medium-sized companies whose bread and butter is dependent on fossil fuels can afford to make?

While the change is slow, it is starting to happen and players who are taking it say it is worthwhile.

Among those who are eyeing transition in the energy industry include the small oil marketing companies.

Through their lobby - the Petroleum Outlets Association of Kenya (POAK) - the marketers have signed an agreement with an energy transition consultant to lead them through the transition process. The process will entail increased use of renewable energy at their petrol stations such as solar energy for lighting as well as powering the pumps. They will also evaluate possibilities of tapping into the growing electric vehicle industry through the installation of charging stations.

Critical challenges

The POAK Chairman Martin Chomba said one of the critical challenges facing the oil and gas sector is the shift to renewable energy, reducing fresh investment in the industry, revenue and threatening return on investments.

"Our members are mainly SMEs, from one pump station to members with over 30 petrol stations. When handled well and enlightened, the transition to renewable energy could be an opportunity to diversify our business offering," said Chomba.

"Another area that this agreement will address is the mobilisation of capital and financial resources. The association will be happy for our members to tap into the climate mitigation funds. We control 60 per cent of the market; share hence the need for capital investments at good returns will help accelerate the fight against climate change."

James Ngomeli, sustainability and Energy transition consultant, said climate change mitigation measures can be adopted by any organisation despite their size.

"The oil marketers are physically well positioned across the country, and we hope they benefit from this new technology like setting up charging stations, increasing their share of the cooking gas market and solarisation of the pumping stations."

Energy transition is also increasingly becoming easy due to the availability of affordable financing, with lenders now increasingly looking at the impact that the projects they are funding have on the environment.

Bernard Ngugi, Stanbic Bank's Head of Power and Infrastructure said the banking sector is increasingly financing companies that are looking at cleaning up the environment. In the case of Stanbic, there are products for firms looking at transitioning their fossil fuel projects to renewable energy as well as those that are starting renewable energy projects from scratch.

"On energy transition, we are working with our clients on two fronts. On the first front, we have solutions that are tailor-made for greenfield projects in renewable energy where it is outright financing that is needed for renewable energy. We have a whole suit that would be fit for multinationals, midsized companies, and even individuals," he said.

"On the second front that we are working with our clients is on energy transition. We have deliberately put in place sustainable linked financing as a solution where we agree with clients on certain metrics that are geared to achieving certain milestones. These include environment, gender equality, creation of employment, and reduction of carbon emissions. Our clients are able to benefit from concessionary financing if they commit to improvement of certain milestones, for instance, towards decarbonisation."

He said in selecting projects to finance, Stanbic has been broadening its criteria on the infrastructure projects that it finances, with the impact that a project has on the environment and society becoming key in determining the funding. It could in the future mean that polluting projects might find it difficult to access funds or access them at higher costs.

Financing solutions

"We subscribe to the UN sustainable development goals (SDGs). This is a key point of consideration whenever appraising an opportunity. We look at the impact on the environment, the community and various aspects of the economy and not always guided by the size but the ultimate objective that projects aim to fulfil," he said.

"For instance in areas away from the grid, we work with companies offering solar home systems, giving them financing solutions for them to reach these homes. In this case, it is not the size but the objective it seeks to fulfil that guides our involvement."

"We have been able to see this help people access clean energy, increase access to information, create employment opportunities in areas where such would not have been available, economic empowerment, majority of the beneficiaries are women and this brings about gender empowerment."

Ngugi added that as renewable energy technologies evolve and people become more conscious about environmental protection, the uptake of cleaner fuels will pick the pace and could become the primary energy in the coming years.

"I would expect to see more accelerated adoption of renewable energy across the board - for industrial usage, domestic, powering public amenities," he said.

"One of the challenges of renewable energy adoption has been experiencing the high cost of battery storage so when you have solar energy during the day, how do you store it and you can use it at night. With improvement in storage capacity, I believe that renewable energy will be the primary source of energy for many economies in the next 10 to 15 years."